Mr. Smith opened by recounting the successes of the Reagan economic policy of the 80s which set the stage for massive growth in the 90s. Tax rates were cut from a high of 91% to 28%, creating 19 million jobs... inflation rates fell from 13.5% to 4.8%... interest rates dropped from 22% to 11%... unemployment dropped from 7.5% to 5.4%... Reaganomics was responsible for doubling the Dow and GDP doubled from 2.7 trillion to 5.4 trillion.

Dr. Dean disagreed emphatically, saying that the 80s were the slowest decade of productivity growth in post-WWII period. “Most of population did not benefit, we had an attack on the unions … the vast majority did poorly in the 80s.”

Mr. Smith then said, “According articles I’ve read on Dr. Baker’s website, clearly, you can find nothing good in America... and there’s never been a Republican that has done anything properly. Ronald Reagan has done more to create a legacy of economic freedom and growth by cutting taxes and creating a conducive environment for business growth than any president in recent history.”

Dr. Dean’s response, “Would you like to bet me $100 that the 80s was the worst decade of growth in post-war era?”

“No thanks, I’m not a betting man, I’m an investor! But I will say that not all economists agree with your position after reviewing all of the data,” concluded Mr. Smith, with the CNBC host interrupting the escalating banter with an invitation to pick the discussion up again soon.

WHAT DO YOU THINK OF REAGANOMICS? LET US KNOW AND WE WILL POST YOUR EMAIL. OR, IF YOU WANT TO JOIN THE DEBATE, TUNE IN ON FRIDAY, JUNE 11th TO ANY OF THE RADIO SHOWS ON THE SUBJECT POSTED ONLINE (in the left column).

WASHINGTON (AP) - The federal government will be closed Friday in honor of former President Ronald Reagan, the White House announced Sunday.

Exempt from the closing are operations department and agency heads determine ``should remain open for reasons of national security or defense or other essential public business,'' according to a proclamation issued by President Bush.

Reagan's funeral service will take place Friday at the National Cathedral.

His body will be returned to California later that day for burial at the Ronald Reagan Presidential Library.
Financial markets will be closed Friday in memory of former President Ronald Reagan, who died Saturday after a long battle with Alzheimer's disease.

The New York Stock Exchange, the Nasdaq stock market and the American Stock Exchange will remain closed for the full day, exchange officials said.

The bond market will also be closed. And the two biggest commodities and futures markets, the Chicago Board of Trade and the New York Mercantile Exchange, also will be closed.

http://www.ap.org

Related StoriesCalifornians pay final respects to Reagan -APRemembering Ronald Reagan by David Boaz, CATO Inst.- June 7, 2004 - Ronald Reagan was the most eloquent spokesman for limited government of our time. Through 25 years of tirelessly "raising a banner of no pale pastels, but bold colors" of political principle, he succeeded in changing the climate of opinion in the United States and around the world.FULL STORY

Ronald Wilson Reagan was one of the three greatest presidents we have had in our nation's history. His love of God, country and family has been an example to me that has kept my priorities right throughout the years.

President Reagan represented everything that is good about America. While not perfect (none of us are) he pursued excellence and truth at every opportunity. He believed in people and the goodness and greatness that exists in each one of us.

Ronald Reagan brought back financial greatness in America, destroyed communism in Russia, ended the cold war -- which gave America her dignity back after the Viet Nam war and the humiliation of Iran taking America hostage. His contributions to our country and the world will be felt for many generations to come. He was a man of the people, by the people and for the people. I know he will be deeply missed by many of us who truly appreciated what he did for our country.

President Reagan was the last president...
... to take a bullet.
... to end the cold war.
... to stop runaway inflation.
... to cut government spending.
... to call a Presidential Commission to study returning to the Gold Standard.
Heaven is blessed to have him as a citizen.

In light of his passing, and in memory of his great life, Swiss-America will be closed for business Friday, June 11, 2004. I hope and pray this week we all take a moment to reflect about how grateful we should be to live in America.

SAVANNAH, Ga. (CBS.MW) -- President Bush will assure the Group of Eight leadership that the U.S. economy will easily absorb modest interest-rate increases, while urging Europe to do more domestically to boost global growth, administration officials said Tuesday.

At the start of the G-8 meeting of heads of state of the world's largest economies, a senior administration official said the United States is "in a position to handle a modest rise in interest rates."

The official told reporters here that U.S. growth is expected to slow to a 3.5 percent clip next year from the 4.6 percent rate expected in 2004 as the economy's excess capacity is absorbed.

SAVANNAH, Ga. (CBS.MW) -- Negative consequences for currencies and global interest rates from record U.S. trade and budget deficits worry the world's leading industrial powers, France's Jacques Chirac said Wednesday.

There is "potential concern" among the Group of Eight leaders, who have gathered in the southern United States for multilateral talks, about what the "eventual consequence" of unchecked U.S. deficits would mean for the global economy, the French president told reporters.

"There was some concern ... and I was not alone," Chirac said, after meeting Wednesday morning with President Bush in a bilateral discussion as part of the three-day summit of the G-8 heads of state at the Sea Island resort just off the Georgia coast.

The summit has so far focused on fortifying stability in Iraq in the wake of a hard-sought resolution passed Tuesday by the United Nations. That resolution lends support to the handover of control to the Iraqi people at month's end, and was passed only after the United States agreed, at the insistence of Germany and France, to limit its role in the war-torn nation.

June 8 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan said the central bank ``is prepared to do what is required'' to stem inflation pressures building in the U.S. economy.

Policy makers have ``provided ample liquidity to the financial system that will become increasingly unnecessary over time,'' Greenspan said in the text of a speech to an international monetary panel in London, delivered via satellite.

Fed officials are ``of the view, as you know, that monetary policy accommodation can be removed at a pace that is likely to be measured,'' he said. ``That conclusion is based on our current best judgment of how economic and financial forces will evolve in the months and quarters ahead.''

Greenspan said the commitment of the Fed's rate-setting Open Market Committee's to a ``measured'' increase in rates, set forth in their May 4 policy statement, is conditional and can be revoked if necessary.

Deflation concerns are `now presumably safely behind us,'' Greenspan said, and there has been a ``restoration of a significant degree of pricing power.''

At the same time, inflation should be capped by competition. ``Fears of losing market share should dissuade businesses from passing these high costs fully through to prices,'' he said.

`Do What Is Required'

If their judgment that inflation will remain contained proves incorrect, Greenspan said, the FOMC ``is prepared to do what is required to fulfill our obligations to achieve the maintenance of price stability.''

The U.S. central bankers left the overnight rate unchanged at 1 percent, nearly a 46-year low, on May 4, saying ``policy accommodation can be removed at a pace that is likely to be measured.''

Federal funds futures contracts show traders expect the U.S. central bank to raise the overnight lending rate by a quarter percentage point at the conclusion of their two-day meeting on June 30. Fed officials at that time will also pool their forecasts for employment, inflation and economic growth in preparation for Greenspan's semi-annual Congressional testimony on monetary policy the following month.

The Fed chairman suggested the central bank is not concerned that rising interest rates will cause a disruption in financial markets, as happened in 1994.

June 10 (Bloomberg) -- The Federal Reserve will at least double its 1 percent interest-rate target for overnight loans between banks by year-end, a majority of economists at Wall Street's largest bond-trading firms said.

The addition of 1.2 million jobs this year, at a monthly average of 316,000 since March, has some economists doubting the central bank can keep its May 4 pledge to raise interest rates at a ``measured'' pace without risking faster inflation.

``You're going to see `measured' disappear from their rhetoric within the next few months,'' said Larry Kantor, 51, head of economics and market strategy in New York at Barclays Capital Inc. and a former Fed economist. ``The Fed actually needs to slow things down.''

Economists at 10 of the 23 primary U.S. government securities dealers that trade with the Fed's New York branch said the so-called federal funds rate will be 2 percent by year-end, according to a Bloomberg News survey. Barclays and J.P. Morgan Chase & Co. are among four firms predicting it will be 2.25 percent. Barclays forecasts a quarter-percentage point increase this month and half-point boosts in August and November.

In a survey of the primary dealers taken April 26-29, eight firms predicted no increase this year, with Barclays among four that forecast the fed funds target rate would reach 2 percent. All the economists surveyed this week said the Fed would lift its target to 1.25 percent on June 30.

After the fastest five-month period of job growth since 2000, the 10-year U.S. Treasury note's yield reached 4.84 percent yesterday, up from 3.65 percent three months ago. The yield is a base for corporate bond and residential mortgage rates. The two- year note's yield, which is more sensitive to changes in monetary policy, rose to 2.80 percent yesterday, the highest since July 2002.

Futures, CPI

Fed Chairman Alan Greenspan said Tuesday that policy makers are ready to ``do what is required'' to maintain price stability, and that the bank's commitment to a ``measured'' pace of interest- rate increases can be revoked if the central bank's judgments ``prove misplaced.''

The 1.29 percent yield on the July fed funds futures contract shows traders have priced in a 100 percent probability policy makers will lift the rate on June 30 in their first increase since 2000. The yield also indicates a 16 percent chance the central bank will lift its target by a half-point this month.

``The Fed has to do something soon and potentially has to do a lot more tightening next year,'' said Joseph LaVorgna, 35, chief U.S. fixed-income economist at Deutsche Bank Securities Inc. in New York. The bank predicts a 2 percent Fed target at year-end.

Inflation Outlook

The combination of job growth and an expanding economy may cause consumer prices to rise 2.7 percent this year, the most since a 3.4 percent increase in 2000, according to the median estimate of 44 economists surveyed by Bloomberg News from May 27 to June 7. As of April, consumer prices excluding food and energy costs rose at a 3 percent annualized pace, compared with a 0.9 percent increase in the first four months of 2003, Labor Department figures show.

The Fed cut its target 13 times between 2001 and last June, reducing the benchmark to a four-decade low from 6.5 percent as 2.7 million jobs were lost and central bankers expressed concern inflation would slow too much. Less than two months ago Greenspan said deflation, a general decline in consumer prices, was ``no longer an issue.''

CHICAGO (CBS.MW) -- The U.S. dollar plummeted nearly 1.5 percent against the yen Monday, with the Japanese currency rallying after the Nikkei 225 stocks benchmark had its largest jump this year.

The greenback was down 1.4 percent against the yen, at 109.66 per dollar. In other currency action, the dollar fell 0.3 percent against the euro to $1.2326.

The dollar's slump against the yen came as Japan's key stock index closed at a one-month high in Tokyo, led by techs and exporters following a better-than-expected U.S. jobs report for May that boosted Wall Street shares and optimism about one of Japan's key export markets.

The Nikkei 225 Stock Average added 311 points, or 2.8 percent, to 11,439.92, its highest close since May 6. See story.

This raised expectations of further fund flows into Japanese equities.

"The yen rose against the dollar as the Nikkei gained more than 300 points, taking away concerns about the recent stock market downside," said Ryohei Muramatsu, senior currency trader at Commerzbank AG in Tokyo.

Also Monday, Japan's finance ministry said the nation's foreign reserves in May stood at $816.85 billion, up $1.88 billion from a month ago. Japan thus remained the biggest holder of foreign reserves of any country for the 54th straight month.

Japan has apparently not conducted dollar-buying interventions since March 16.

Last Friday, the dollar swiveled in volatile trading against its major counterparts following the release of upbeat, but largely as expected, U.S. jobs data.

The Labor Department's latest release showed the U.S. economy generated another 248,000 jobs in May, while the jobless rate held at 5.6 percent. The figures matched or were roughly in line with market expectations.

NEW YORK, June 9 (Reuters) - Precious metals fell across the board early Wednesday, hurt by a rising dollar that dulled investor's desire for dollar-priced metals, traders said.

Gold, silver, platinum and palladium prices all fell as traders lightened up on positions, taking their cue from the dollar, which rose against the euro after U.S. Federal Reserve Chairman Alan Greenspan said the central bank would do "what is required" to keep inflation in check.

"I think we're just coming off against the Greenspan remarks and the way gold and silver reacted yesterday," said platinum group metals trader Ralph D'Esposito at RJ Futures in New York.

The dollar climbed as U.S. interest rate expectations got a boost after Greenspan's remarks Tuesday suggested there could be sharper interest rates increases than had been expected.

Analysts say the increased possibility the Fed might become more aggressive than previously thought in raising rates made the dollar more attractive, thereby dulling interest in gold as an alternative investment.

July platinum on the New York Mercantile Exchange plunged $23.60, or 2.83 percent, to $810 an ounce by 9:50 a.m. EDT (1350 GMT), accelerating losses after overnight long liquidation in Asia. Spot (XPT=) hit $810.00/815.00.

Thinly traded September palladium tumbled $18, or 7.41 percent, to $225 an ounce. Spot (XPD=) was at $219.00/224.00.

"It's based on the stuff Greenspan had to say yesterday and the euro making lows below $1.2150, a fairly big number, and I think that dragged the gold and silver down," a trader at a precious metals refiner said.

The euro was off session lows after a fairly sharp sell-off earlier. It was last down at $1.2156.

COMEX August gold futures (GCQ4) slipped $2.80 to $389.00 an ounce, within a range of $392.70 to $387.50.

Gold remained in its recent $15 range, however, between support at $385.50 an ounce and stiff resistance at $400.

Spot gold (XAU=) priced at $387.75/8.50, below Tuesday's late quote in New York at $390.75/1.50. Wednesday's early fix in London was $389.30 an ounce.

July silver (0#SI:) edged up 2.0 cents to $5.79 an ounce, after erasing earlier steep losses. It traded between $5.71 and $5.82. Spot (XAG=) was flat from the previous New York close at $5.77/5.80. Wednesday's London fix was at $5.74.

During the busy tax season, Scott Silver, 46, usually drives to see his clients. Silver is an enrolled agent, authorized by the IRS to help people with their taxes. As gas has gone up, so have his costs. He tries to get more clients to come to him, or to do more work via fax. The St. Augustine, Fla., businessman recently traded his Honda Accord for a Honda Civic Hybrid to get better gas mileage. Another plus: He gets a $1,500 tax deduction on the vehicle. Silver's wife commutes 110 miles a day. To further cut commute time — and costs — the couple expect to move this fall to a home closer to her job.

Ice cream or gas?

Gas prices ripple through the life of Kevin Finlay, 23.

Kevin Finlay won't run out on a whim for ice cream at the Cold Stone Creamery in Marietta, Ga.

The consulting engineer from Atlanta thinks twice about the little stuff because gas costs so much. "Every extra dollar I spend buying black gold, I can no longer pump into my local economy boosting business revenue and prosperity," he says. "This also leaves me cutting most luxuries and frivolous items out of my life. I used to run out to get ice cream or a good sandwich, and now I think twice because of gas prices and usually do not go."

Staying away from home

Melissa Jackson, 29, of Corbin, Ky., rents a room for $150 a month so she doesn't have to commute so often and use so much gas. The extra expense is less than her gas and vehicle wear-and-tear costs would be, she says. Jackson, an administrative assistant, drives 90 minutes to work — one way. She has also cut back on spur-of-the-moment trips and those "just to drive or hang out at the mall."

More downtime

There was no Memorial Day holiday travel for Joseph Weiss, 38, a National Guard training officer. He canceled his plans to save gas money. In addition, "Gasoline costs are still unrealistic, so I now think a lot harder about any other non-essential purchases," he says. Based in Springfield, Va., Weiss also "exclusively" goes to the nearest discount or off-brand gas station.

Saturday, June 5th was a sad day in America as one of
the greatest heroes of this generation passed away, Ronald
Wilson Reagan.

This week Americans will honor him as one of the truly great
presidents of all time. As the 40th president of the country, his
signature in my Presidential Collection takes on new meaning.

My wife Melissa and I met Mr. and Mrs. Reagan back in 1990,
when we sat with them at the head table. President Reagan received
the Humanitarian of the Year award, which was awarded after the
Berlin Wall fell.

Many Americans have forgotten that he was the man responsible
for the fall of the wall, but it didn't actually take place until
after he left office. However, few would argue that it was his
determination, vision and resolve that caused it to happen.

President Reagan was a warm engaging man who made Melissa and I
feel like family, in the brief time we had to visit with him
before the dinner. I will never forget Ronald Reagan looked me
straight in the eye as he shook my hand with a very firm grip
(not some pansy "how are you" kind of hand shake).

It was a great privilege to talk with one of my heroes
and finally meet him -- and discover that all the talk about
him was true. He was and still is a great man.

He will be greatly missed and I encourage you to sit
down with your children during the ceremonies this week and
explain to your kids just what this man did to help pass on the
legacy of the free world we live in today.

Fourteen years ago I met a man who taught me
that greatness and humility are very compatible and the key
foundation of all true statesman. Politicians live by the polls,
but statesman live by their convictions.

Somehow just knowing that President Reagan was still sharing the
same air we breath was a comfort, but we are greatly relieved
that his suffering, and that of his dear wife Nancy, who watched
him languish over the last decade, is over. Though he is now in
the company of Patriots in the most shining city of all, his
spirit and legacy in this life are eternal.

As a Christian, I honor Ronald Reagan for his unwavering
committment to the truth, and to life - both on earth and in
eternity. Ronald Reagan understood that he would one day
he would give an account of his life - and I have no doubt
he will hear the words of his Heavenly Father saying ...
"Enter in thou good and faithful servant."

THE BIGGER PICTURE

I don't expect his passing will have any effect on the financial
markets. The bigger picture however is that the threat to oil and gas
supplies that Al Queda still represents. I don't think the last
attack in Khobar is the last.

While the terrorists up till now have only chosen "soft targets"
they saw the effect on the market. I'm confident it will embolden
them to look at ways to hit "hard targets". Targets like Ras
Tanura, which is the worlds largest offshore oil loading facility
from which 10% of all the oil in the world flows daily. Ras Tanura
sits on the Persian Gulf along with Ras al-Ju'aymah.

On the Red sea, the only major oil export terminal is Yanbu.
According to the International Institute for Global Security...
"A terrorist attack on each of these hubs of the Saudi oil
complex or a simultaneous attack on a few of them is not
a fictional scenario. A single terrorist cell hijacking
an airplane in Kuwait or Dubai and crashing it into Abgaig
or Ras Tanura, could turn the complex into an inferno."

"This could take up to 50% of the Saudi oil off the market
for at least six months and with it most of the world's spare
capacity, sending oil prices through the ceiling."

Former CIA officer Robert Baer say this would be more "economically
damaging than a dirty nuclear bomb set off in midtown Manhattan or
across from the White House in Lafayette square."

The terrorists clearly want to destroy or disrupt ours and the
world's economy. That fact has and will have a huge impact on the price
of gold. Future attacks -- according to CIA, FBI and Office
of Homeland Security -- are inevitable.

I don’t believe the stock market at this time has allowed adequately for RISK. It seems to me that U.S. investors today are living in a world of stubborn, almost mindless bullishness – this in the face of the many severe problems that face this nation.

And I ask, does any of this have to do with why the Fed is literally drowning the nation in liquidity? I don’t know, but it does make me think that these are ideal condition for the accumulation of gold. Gold is cheap, and paper money is far cheaper. Gold is the ultimate “emergency asset.”

The only thing that can happen to a gold coin that you hold in your hand (held preferably in your clenched fist) is that you drop it into an unreachable crevice or that somebody physically takes it away from you – and if somebody does takes your gold away from you, I honestly do not think it will be the U.S. government, as so many seem to fear.

Now let’s turn to the stock market. This market is now as “confused” and deceptive as any I’ve ever seen. I read the output of dozens of what I consider the best minds in the nation on the markets, and as I said – confusion reigns.

And my reaction is – “Why gamble when you don’t have to?” And we don’t have to. I consider the current background to be one of a upward correction in an ongoing, long-term primary bear market. I believe a lot of the confusion is a result of the Greenspan Fed pitting itself “tooth and nail” against the bear market forces.

The S&P is now lower than where it was six years ago, and my bet is that the average retail investor has actually lost money in stocks over the last six years. The only real money has been made by those who have bought and held homes over those same six years, but of course you don’t actually register a profit until you sell your home.

Now I want to make some comments about gold. I went through the gold bull market of the ‘70s and it was a devil. I started buying U.S. gold coins in 1972 at $70 a piece, along with Homestake and Dome Mines. Here’s what we went through in that gold bull market. A correction of 28.4% in 1973. Then a huge correction of 60.7% during 1974 to 1976. Then a correction of 32.7% during early 1980 prior to the extreme top in late-1980. I sold my gold and stocks when gold hit 660, prior to its final run to its 1980 high of 850.

That’s how wild and emotional a gold bull market can be. But back then there was no fear of a collapse in the U.S. dollar. Gold was rising with inflation. Today it’s different. The dollar, beset by huge U.S. deficits, is in real danger. Under these conditions, the question is whether investors should ever sell their gold, or at least their gold bullion.

I’m asked what the U.S. government’s attitude is towards gold. My answer – their attitude is – “Leave gold alone, but definitely don’t encourage people to buy it.” Why do I say that?

Answer – Month after month goes by and the authorities have still not OK’d a gold ETF. A gold ETF would allow Americans to buy gold easily; a gold ETF would supply almost instant liquidity to gold for the average retail buyer. A U.S. gold ETF hasn’t happened yet, although it’s happened in Australia and Britain. And you have to ask – WHY?

The next situation I want to address is the Mideast situation, and the growing danger of a major interruption in oil. There’s no question in my mind but that Saudi Arabia is a tinderbox, a disaster waiting to happen. Under these circumstances, I can’t see important, knowledgeable money coming into the stock market big time. It’s too much of a gamble. And big money says to itself, “Who needs to gamble?”

Therefore, I see this market fluctuating, messing around, rallying a bit and declining a bit. but behind the whole situation lies the power of the primary bear trend. Adding to the problems for true investors is the fact that stock values are ridiculously high – far above anything that can even remotely terms good values.

Furthermore, and I’ve written this many times before – “In a bear market whatever can go bad – will go bad.” . . .

You have problems, obstacles, challenges, difficulties and trials in your life.
As a result you are frustrated, depressed, anxious and worried. The question
is "What do you do?" and what do you do now down here on Earth in the
middle of this mess?

A lot of religions teach that it is God’s will for you to suffer. The Hindu’s teach
that and they call it karma. A lot of people think they are suffering down here
on earth because of bad karma. In fact, the late Beatle John Lennon sang a song
about instant karma. Many churches teach you that it is God’s will for you to suffer.
Now, there is a partial truth wrapped up in that statement. Sometimes suffering is
necessary for us to grow spiritually. However, your destiny is not to be one of
endless suffering. At some point, you should learn what you are supposed to learn
and then experience breakthrough. The key to your breakthrough is wrapped up in
you have been placed here on earth for a purpose. Now, that concept is so simple
that it completely misses most of us. It certainly misses much of the media, the
scientific establishment and society in general, who think we are here on earth
by accident or chance.

The reality is that you are not in this thing called life alone! In fact, you are not in
your own life alone. You are not alone! God is with you in whatever trial, difficulty
and situation you may face. In plain, simple English that means that if your marriage
is a mess, your family needs help, your career is nowhere, health problems, financial
difficulties or whatever the challenge is. This God who created you…this God who
exists -- He does not sit passively in Heaven watching your predicament saying
"Oh well" and chuckles.

This God who really cares about you died to set you free and His compassion is
endless. He is truly a Heavenly Father who like an earthly father, that you may have
never known, is full of love toward you. Like a true Father, He is intimately involved
in your life. He may allow trials and tests to teach you. But, His desire for you is growth,
fruitfulness and yes, fulfillment! I am a Dad of three children. I recognize that my children
have self-centered natures. As such I will have to discipline them in order that they can
become what they were designed to be. However, because my heart overflows with love
for them, I want them to be all who they were created to be! I want them to experience
good things in their lives and be blessed. This is a very simple, but profound attitude
regarding what our perception of God should be.

You are here on earth to experience breakthrough. Like an athlete you must learn to
overcome the obstacles placed before you. You have a choice, you can give into the
mediocrity that you see all around you. You can give into depression, addiction and
despair. Or you can learn to triumph. A lot of people think that suffering is the truly
spiritual thing to do. But, learning to triumph is far more spiritual than simply suffering.
Anybody can suffer, but very few learn how to triumph and to overcome. You need
to understand that you were called to be an overcomer. That is your destiny, but the
process of learning how to overcome begins now. Whatever trial, difficulty and
challenge you face can be overcome!

For more on how you can find breakthrough and to be an overcomer in your life,
order Paul McGuire's book’s The Breakthrough Manual and The Overcomer Workbook.

Paul Mcguire is the author of many books dealing with
personal and societal change, from the inside out. He
is featured as one of dozens to top Christian leaders
interviewed in the 1990s discussing what we could expect
in the 21st Century. (Read/Listen MORE of "The Big Picture")

WASHINGTON (Reuters) - Few leaders have whole movements named for them, especially one as emotionally laden as "Reaganomics" -- the late President Ronald Reagan's blend of tax cuts and massive military spending that got the economy moving again but tripled the nation's debt.

It was a policy former President Bill Clinton dubbed "reckless" as he pressed to use budget surpluses to pay down debt instead of cutting taxes.

Reagan's prescription, coupled with a drive to lighten government's regulatory hand, was denounced as "trickle-down economics" by detractors who believed tax cuts for the wealthy would mean only crumbs for the poor.

But its supporters counter that it helped snap the economy out of a lethargy that had reigned for much of the 1970s.

The U.S. economy expanded steadily from late 1982 to July 1990, creating nearly 20 million jobs and triggering a boom in stock markets that carried on until 2000.

Nonetheless, nearly a quarter-century after Reagan was first elected in 1980 to the first of his two four-year terms, his economic legacy remains deeply polarizing.

Whether Reaganomics was good or bad for America, fair or unfair to different income groups, may never be resolved.

"The disagreement over the 1980s ... will almost certainly become a prominent feature of intellectual life," wrote Reaganomics proponent Robert Bartley in his book "The Seven Fat Years."

The debate has its echoes under the administration of President Bush, who has presided over big tax cuts and a return to deficits. However, that massive fiscal stimulus seems now to be paying off with the recovery from the 2001 slump at last kicking into high gear.
Stomping out inflation

Veterans of the Reagan administrations and conservative scholars say the bold policy helped end a period of malaise in the 1970s when inflation soared and interest rates were sky high.

Critics point to massive debts of the era -- the country owed more than $3 trillion by the end of the decade -- and say Reaganomics triggered a "decade of greed" with Wall Street traders in red suspenders grown rich on bond dealing.

Officially, the Reagan doctrine was known as supply-side economics, a policy based on the expectation that big cuts in marginal tax rates would mean workers would keep -- and spend -- more of their wages, thus creating the need for more production. This would lead to more investment and more jobs.

It would also generate rapidly growing output that would ease inflationary pressures and stimulate a greater flow of revenues to keep budget deficits in check.

William Niskanen, former acting chairman of President Reagan's Council of Economic Advisers who is now chairman of Washington-based think tank the Cato Institute, said much -- but perhaps not all -- of the theory worked.

One reason is that supply-side stimulus was implemented at the same time as Reagan began a vast military buildup now credited with helping trigger the collapse of the Soviet Union by simply out-spending it.

"The two greatest accomplishments of the Reagan era were breaking the back of inflation and substantially reducing marginal tax rates," Niskanen said. "One of the major charges is that there was a big accumulation of debt and that is accurate."

"But I would contend that ending the Cold War and breaking the back of inflation made it worthwhile," he added.

In 1980 when Reagan was elected, inflation was running at 13-1/2 percent annually. It was under 5 percent when he left office in 1989.
Ending 19% interest rates

Under the guidance of cigar-chomping former Federal Reserve Chairman Paul Volcker, the federal funds rate that influences lending rates throughout the economy soared to 19 percent in 1981 -- compared with today's 1 percent -- and the economy slid deep into recession before recovering in late 1982.

"That tight money policy, first under Volcker and then under (current Fed Chairman Alan) Greenspan could not have been done without strong backing from the president," Niskanen said. "Reagan backed up Volcker throughout that politically difficult time until growth finally resumed in November 1982."

The offsetting influence against tight money, and a key part of Reaganomics, was a dramatic reduction in tax rates. From a peak of 70 percent when he took office, the top marginal rate was slashed to 28 percent for most working Americans.

Niskanen said it was "a bum rap" to claim the benefits of tax cuts went to the wealthy while the debt burden was shared by all.

"The actions taken initially in 1981 set us on a sustainable growth path and they were absolutely necessary to get on to that path," he added. Remarkably, the will to apply the stern medicine of stiff interest rates and to risk cutting taxes so dramatically came from a president who received small credit for grand thinking.

"Reagan was always too casually dismissed by intellectuals who missed the point that he has extraordinarily good convictions," Niskanen said. "I don't know where he got his convictions because he wasn't greatly interested in analysis, but they were extremely good."

Signs of a "new era" in housing are everywhere. Housing construction is taking place at record rates. New records for real estate prices are being set across the country, especially on the east and west coasts. Booming home prices and record low interest rates are allowing homeowners to refinance their mortgages, "extract equity" to increase their spending, and lower their monthly payment! As one loan officer explained to me: "It's almost too good to be true."

In fact, it is too good to be true. What the prophets of the new housing paradigm don't discuss is that real estate markets have experienced similar cycles in the past and that periods described as new paradigms are often followed by periods of distress in real estate markets, including foreclosure sales, bankruptcy and bank failures.

Price inflation follows monetary inflation

The price of just about everything I buy is going up these days. Gasoline is higher, dairy products are higher, paper products and just about everything else—higher. Mainstream economists have sounded surprised by the recent upturn in price inflation and they have offered us every excuse to ignore signs of inflation: Ignore rising oil prices. Ignore rising food prices. Ignore rising health care costs. Ignore higher taxes and government fees. And then there is their dirty little secret about housing prices.

Higher price inflation should not have been a surprise given that the Fed has increased the money supply by 25% during the period 2001–2003. In addition, the price of basic commodities has been rising for many months and these higher commodity prices eventually turn up in the price of goods and services. One leading indicator of higher commodity prices is the Dow Jones Commodity Index (stock prices of major commodity producers). It has been rising since the fourth quarter of 2001 and has doubled in value since that time. This stock index is now higher than it has ever been, outside of the blip that occurred in mid-2002.

Only recently have commodity prices begun influencing government price indexes like the Producer Price Index and the Consumer Price Index. For the first four months of 2004 CPI-inflation increased at an annual rate of 4%, which is a higher rate than we have "experienced" in the last few years. The Producer Price Index actually decreased in 2001, but has increased in 2002 and 2003. Over the last year, prices for finished producer goods increased 3.7% while at earlier stages of production the prices for intermediate goods increased by 5.1% and the prices of crude materials index surged 20.4%. This would suggest that there is plenty of price inflation still in the pipeline. The experience of the 1970s would suggest that price inflation adds fuel to housing bubbles because tangible assets like homes serve as a hedge against inflation.

The Dirty Secret

While this price inflation did not surprise me, the delay in its arrival did. That is, until I came across the dirty little secret in the CPI. With prices increasing all around us, there is one thing in Auburn, Alabama that seems to be in abundance with stable, if not declining prices. This "good" is now being advertised on most streets throughout the town, whereas in the past it did not require much, if any, advertising over the twenty-plus years I have lived in this college town. This abundant good is apartments and rental houses.

It is a truly odd market when houses and apartments move in opposite directions. After all, houses and apartments are just different products in the same "market for housing." In Auburn, it is nearly impossible to find the kind of house you want to buy despite frantic building by construction companies, and yet rental properties (which include many smaller houses) seem to be readily available in all shapes and sizes. Has the population changed? Have people become anti-rent? Or are we just in a "new housing paradigm"? Is this a "new era" of homes?

Greenspan's low interest rates have driven renters to become homeowners and knocked the market out of equilibrium. Underneath this Fed-inspired distortion rests the dirty little secret of how the cost of housing has served to limit increases in measured inflation. The Consumer Price Index has underreported price inflation because the government uses the rental value of housing, rather the actual price of houses, in their index.

In the basket of goods used to calculate CPI, the goods that have increased slower than housing include food and beverages, recreation, and education, which total to about a 30% weighting of the CPI basket of goods. Housing accounts for 42% of the basket, with housing "prices" representing almost 25% of the entire basket. However, housing prices are calculated with "Owner's equivalent rent" which is an estimate of the rent that people would have to pay for their houses. With home prices rising and rental rates stagnant, CPI underestimates the real rate of price inflation over the last year by about 50%.

That's the command from a handful of Southern California Republican congressmen involved in an effort to replace Franklin Delano Roosevelt's image on the dime with Ronald Reagan's.

Rep. Mark Souder, R-Ind., introduced the legislation that would boot the Democratic architect of the New Deal in the Great Depression from all future 10-cent coins to make way for the conservative icon.

"It is particularly fitting to honor the Freedom President on this particular piece of coinage because, as has been pointed out, President Reagan was wounded under the left arm by a bullet that had ricocheted and flattened to the size of a dime,' Souder wrote to colleagues in rounding up support for his bill.

About 80 lawmakers, all Republicans, have co-sponsored the Ronald Reagan Dime Act, including David Dreier of Glendora; Dana Rohrabacher of Huntington Beach; Elton Gallegly of Thousand Oaks; Buck McKeon of Santa Clarita and Bill Thomas of Bakersfield.

"FDR believed the federal government should spend your dimes. Ronald Reagan believed the people should spend their own dimes. I think it's clear that the dimes in your pocket should bear Ronald Reagan's image,' Gallegly said in a statement explaining his support of the bill. Other California congressional aides insisted their bosses have nothing against Roosevelt.

[Ed. Note: Perhaps we should consider the first two headed dime ... FDR on one side (Democrats) and Reagan on the other side (Republicans).]

WASHINGTON - U.S. Rep. James McGovern yesterday said he's reconsidering the fight he led in Congress to block conservative lawmakers from putting Ronald Reagan's face on the dime, replacing Franklin D. Roosevelt.

``We're reviewing the situation,'' said McGovern (D-Worcester) spokesman Michael Mershon. ``No decisions have been made. This week is a time for mourning and celebrating Ronald Reagan. We will come back to this issue later.''

McGovern filed a bill late last year that would keep FDR's profile on the dime. The Worcester Democrat won support from 106 co- sponsors. The bill was aimed at maintaining FDR's legacy, not diminishing Reagan, said Mershon.

McGovern's bill was in response to an earlier measure, the Ronald Reagan Dime Act, proposed by U.S. Rep. Mark Souder (R-Ind.)

Souder and other Republicans had been outraged by a CBS TV miniseries that cast Reagan in a critical light.

Nancy Reagan, the late president's widow, has said she does not support putting her husband's face on the dime. She said it would be wrong to replace FDR on the coin.

Mershon noted FDR has always been associated with the dime due to his fund-raising work for a polio research charitable group, which came to be known as the popular ``March of Dimes'' campaign.

Roosevelt's face has been on the dime since 1946.

Some have suggested a compromise of putting Roosevelt and Reagan on alternating sides of the coin.

David M. Bradshaw is Editor of Real Money Perspectives,
publisher of Rediscovering Gold in the 21st Century:
The Complete Guide to the Next Gold Rush (7/01) and
has been an economic commentator since 1987, when he
produced the World Economic Perspectives radio show.
In 1997, he produced a one-hour TV documentary, "Preparing
Wisely for the Next Millennium," which was distributed
free of charge at Blockbuster Video nationally. In 1999, he
produced a one-hour radio special, "The Big Picture: The
Shape of Things to Come" discussing geopolitical,
economic and spiritual trends in the 21st Century.
... MORE NOTE: Youngest daughter Braida (4 months) just discovered that she has control of her tongue -- a valuable lesson for us all to remember!

DISCLAIMER: All of the information in this story is believed to be true,
however errors are possible. Past performance is no guarantee
of future performance. All investments have risk.